Home Economy Kenya Power risks Sh1.7bn fine over unclaimed assets

Kenya Power risks Sh1.7bn fine over unclaimed assets

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Benard Ngugi, new Kenya Power CEO. PHOTO | DIANA NGILA | NMG

Kenya Power risks Sh1.765 billion penalty for not surrendering to the State unclaimed assets that include dividends and stale cheques as required by the law.

The Auditor-General Nancy Gathungu disclosed in the latest audit report that the utility firm was at the end of June last year still holding Sh922 million in its books against the requirements of Unclaimed Financial Assets Act, 2011.

Ms. Gathungu said the unclaimed assets, ought to have been surrendered to the Unclaimed Financial Assets Authority (Ufaa).

“Although the management is confident that the outstanding balance will drop following the ongoing review and audit of assets, this aspect of non-compliance may cost the company up to Sh1.765 billion in interest and penalties as at June 30, 2019,” warned Auditor-General.

Also making up the unsurrendered assets are deposit refunds, unidentified receipts, unpaid customer electricity deposits and unpaid way leaves compensation.

The value of unclaimed assets is 3.5 times the Sh262 million net profit that the electricity distributor made in the year under review.

Ufaa latest data shows unclaimed assets have risen by 23 percent in 2019 or Sh3 billion to Sh16 billion, most in uncollected salaries, pension dues, matured policies, bank deposits and royalties.

The law allows Ufaa to charge any entity that fails to surrender unclaimed assets a penalty of 25 percent of the assets held.

In addition, Ufaa also charges a penalty of between Sh7,000 and Sh50,000 for each day that the assets stayed before being submitted.

Kenya Power had noted in the previous annual report that it was yet to submit qualifying unclaimed assets at end of the four financial years to June 2017, only saying it was engaging Ufaa.

The firm has been facing a period of falling profits, rising debt and squeezed working capital.

Kenya Power has for instance remained in the negative working capital position—current liabilities exceeding current assets— for the third consecutive year, due to rising short-term debts.

Paying out such money to Ufaa at once looks set to squeeze its operations at a time it has issued the third consecutive profit warning, preparing investors for a more than 16-year low earnings.

Cash flow challenges also saw KenGen hit Kenya Power with a Sh722.31 million financial penalty for flouting 40-day window of paying for the electricity supplied in the financial year ended June 2019.